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A hard lesson learned - Part II

A hard lesson learned - Part II

October 13, 2010

And now for the rest of the story ...

We were talking yesterday about the Pepsi Challenge. Coke was gradually losing market share to Pepsi in the 1970s and early 80s while in city after city Pepsi was beating Coke in head-to-head taste tests. (To see Part 1 of this 2-part series, click here.)

Coke made the infamous decision to develop a new formula and in its research tests it found the New Coke formula was beating Pepsi. So Coke launched New Coke … and it was a disaster! Coke enthusiasts were outraged. It was PR nightmare and Coke brought back Coke Classic within 3 months.

Coke never changed its formula again. Pepsi continued to win the taste tests. Yet, Coke is still the #1 seller and Pepsi never overtook Coke. What happened?

To find the answer Malcolm Gladwell turned to similar research done with margarine and brandy that he explains so eloquently in his bestseller, Blink: The Power of Thinking Without Thinking.


Years ago, margarine was white -- not yellow -- and it never sold well. After a series of taste tests, researchers found the problem wasn't due to the taste. The problem they learned was in the packaging.

You see, in the 1940s Imperial Margarine never sold well. Market research consultant Louis Cheskin was called to help boost sales. He had an idea: what if you colored margarine yellow so it looked like butter? At the time margarine was white.

Like a good market researcher, he tested his theory. He held a luncheon with speakers, served a nice lunch and set pats of butter and margarine on the tables for all the guests. He didn’t tell them which one was margarine. He also didn’t tell the guests that it was a margarine taste test challenge. Afterwards, he asked the guests how they liked the speakers, the food and yes the butter. The response: the butter was “just fine.”

Check out what happened next ...

Officials for Imperial Margarine were devastated and concluded they had no future. Cheskin saw it just the opposite. He was elated! Why? Because the test proved that people like margarine just as much as they liked butter. In other words, the taste wasn’t the problem. They just had to figure out how to increase sales.

What he did next was ingenious. At the time, anything wrapped in foil meant quality. So he wrapped the margarine in foil, colored it gold (because he knew yellow was a hit) and served the yellow margarine in a taste test. When he gave someone two identical pieces of bread – one buttered with white margarine and the other buttered with foil wrapped yellow Imperial Margarine – the second piece won every time, hands-down.

The problem wasn’t with the taste! The problem was simply the packaging. 


More recently, Christian Brothers Brandy was losing sales to its competitor E & J, even though more people preferred the brand Christian Brothers. Again, the problem was with the packaging.

Christian Brothers discovered the same thing when it tried turning around its brandy sales. They were gradually losing market share to E&J. In taste tests, people preferred Christian Brothers to E&J but in subsequent tests, Cheskin again discovered they were losing sales because of the packaging.

E&J’s bottles were much fancier. They had ornate labels, smoked glass and the packaging was much richer and textured. A Christian Brothers bottle looked more like a wine bottle and was plain and boring. The company redesigned its bottle to be more like E&J and sales increased!

So what does this tell us about the Pepsi Challenge?

People don’t buy something on taste alone. They never buy something blindly. All of the unconscious associations we have with the brand, the image, the can and even the logo come to life when he chose to make a purchase.

Coke also made the mistake of not identifying the real problem. The problem wasn’t with its formula. It tasted fine. The only reason it lost in taste tests is because Pepsi is sweeter than Coke so it won in initial sip tests. But drink a whole can of it and it can become overpowering. In fact, if people were asked to drink a case of the two brands over several weeks, the results would probably have been the exact opposite – which is why Coke is still the leading brand.

So now you know the rest of the story. 


Here are a couple key lessons learned:

1. Always make sure you’re defining the problem correctly. Sales of Coke, Imperial Margarine and Christian Brothers Brandy weren’t down because of the taste! They were down because of increased competition and in some cases – the packaging.

2. Test. Test. Test. Louis Cheskin didn’t just test once and he tested and re-tested his theories again and again to make sure they were absolutely correct.

If you're sales are struggling, take a look at the packaging. It may not be your “special formula” at all. The problem may be in how the product is presented. But you’ll never know until you test it. Then test it again. And test it again!

To your success,


Jon Goldman, President & CEO 
Brand Launcher 
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